Retiring from the workforce without substantial assets

Financial challenges await the retirees without full home ownership or a public housing place.

The financially challenged retirees could include seniors who could not pay off the home mortgage before leaving the fulltime workforce and seniors renting in the private sector. Moving to a less expensive housing might be the better solution when the regular pay packet declines.

Affordable housing for retirees is available in some lifestyle communities. The manufactured home on a leased site might require less capital than a separate home: a way of having your own home without the ongoing burden of a mortgage.

For full Age Pensioner retirees without any substantial assets, renting an apartment in a lifestyle community could provide affordable housing. Read more about the types of lifestyle community accommodation available.

Remember, Australian Social Security provides a basic income for permanent residents who are in constrained financial circumstances. The Age Pension is adequate for a frugal lifestyle for seniors who fully own their own homes. Public housing tenants might also just manage on the Age Pension. Private sector tenants could be spending at least one third of the Age Pension on housing costs after allowing for any Pensioner Rent Assistance.

If you are hoping for an active retirement then you would need to have completed the purchase of your home and accumulated some additional resources.

Lack of financial resources is not a barrier to residential aged care

Residential aged care is available to all who need nursing care and personal support. The gate keeper function for Commonwealth regulated and potentially subsidised Residential aged care is the ACAS. The ACAS, Aged Care Assessment Service, assesses a person’s needs for personal support and nursing care. Seniors who are assessed as needing more personal support and nursing care than just a daily visit are permitted to enter residential aged care. Seniors who could not live safely at home alone could be eligible for permanent residential aged care.

The cost to the new resident of living in Commonwealth regulated residential aged care does depend on the financial resources. Every aged care resident pays the Basic Daily Fee, a ‘housekeeping’ contribution set as of 85% of the Age Pension.

Residents who had less than $157,000 of assets and only the full Age Pension as income on entry to permanent aged care are classified as Low Means Residents. Low Means residents who have an ongoing full Age Pension together with under $46,000 of assessable assets pay only the Basic Daily Fee, the Commonwealth pays for their aged care accommodation and care costs.

The first member of a couple to enter residential aged care might be assessed as a Low Means Resident and allocated a Low Means placement.
The Low Means placement does not change when the partner leaves home; the Accommodation Contribution could increase and a means tested care fee might be levied.,
Read more about Low Means Residents and how they could pay more if their assets and/or income situation changes.

The Commonwealth will not pay the full costs of residential aged care for seniors who own significant assets such as a now vacant home, and/or have income in addition to the Age Pension. These aged care entrants are expected to pay their own aged care accommodation costs plus some of their care costs. The system of aged care means tested care fees and accommodation prices are complex.

Using some financial assets to pay a Refundable Accommodation Deposit could impact favourably on your means tested fees and your potential Age Pension amount.
In contrast, selling the former home to finance residential aged care could substantially change the Age Pension amount and possibly increase the means tested care fees.

Understanding the potential impact of leasing rather than selling the former home is critical to finding the right aged care financing option for your family.

A consultation with Financial Care Services helps you understand your potential aged care costs together with the DVA and Centrelink implications of rearranging your assets, leasing or selling the former home.Christine at Financial Care Services understands the DVA Pensions and Centrelink assessment of the means tested amount for aged care both home care and residential aged care.

A consultation with Financial Care Services before you accept an aged care place could help you avoid financial distress and inappropriate timing of the sale of the former home.Contact us to arrange an aged care consultation before you sign the Resident Agreement. Please email your enquiry to receive a Financial Care Services Financial Services Guide and Aged Care Data Checklist.

Assistance with completing the Commonwealth aged care means testing forms is available to clients of Financial Care Services.

Financial Care Services is an independent financial advisory service specialising in retirees of modest means and aged care entrants. Our core values of working with clients in their lifetime financial planning supports claiming DVA and Centrelink entitlements.

Financial Care Services charges fees based on the work involved in advising you about pensions and aged care financial solutions and arranging your investments.___________________________________________________

Disclaimer: The information contained in this newsletter is of a general nature only and does not constitute “financial advice”. You should obtain your own personal financial advice before investing any money or moving in to any retirement village, lifestyle community or aged care facility. Financial Care Services is licensed to provide financial advice to individual clients based on their personal situations.

All eligibility for Commonwealth benefits will be determined by Centrelink or DVA, based on your personal position as documented and the legislation and Regulations in force at that time.